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Are You Acting Your Wage?

When my husband and I were deep in the throes of paying off our wedding debt a few years ago, I started obsessively reading personal finance blogs. I learned a lot of practical tips from Frugal Dad, The Simple Dollar, Get Rich Slowly and other Wisebread stalwarts. But one of my biggest ‘Aha!’ moments came courtesy of debt guru Dave Ramsey, and his dictum to “Act your wage.” Dave meant, ‘Spend only what you can afford,’ but I took it more literally. How much would a financially responsible person making my salary spend?

Honestly, I had no idea.

I’d always associated keeping up with the Joneses with “Housewives of” behavior: the slavish label-following, the obsessive focus on appearances and chic experiences. One look at my 14-year-old car and you’d know that’s definitely not me. But, I realized, my perception of how my peers were living had actually been driving my spending and my financial health.

When I was 24 and about to move to Manhattan, for instance, I asked a coworker at my temp job what he thought the minimum salary would be to live comfortably in New York City. He was ten years older than me, an ex-pat New Yorker, and I’d met him filling in at the IRS; I thought he’d know his financial stuff. He thought deeply, then said: “Thirty thousand dollars.” Unfortunately, I was moving for a job that paid $20,000. (This was 20 years ago, mind you.)

As a result, when I landed in the East Village of Manhattan a month later, I clutched my cash tight. I felt like I was already deep in the hole, so I thought over every expense. I walked 30 minutes to work. I bought used books and $5 beers. When I hit the diner for breakfast on weekends, I tried to go before 9am for their $1.99 special. I turned off every light as soon as I wasn’t using it. (One month, my electricity bill was $13.) I saved money that year.

But then I got another job: One that paid a big $25,000. That’s 25% more paycheck! I thought giddily. It wasn’t quite the magic $30K, but a year of fairly easy survival had dulled my financial fear. I immediately got a bigger, more expensive apartment. I started eating out more. I started going out more. It never struck me as anything to be wary of, because my friends and peers were doing it too.

I figured we were all making about the same salary, so we should all be able to do the same things, right?

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So when a friend raved about a new restaurant, I didn’t think twice about going to try it out. Night out with the girls? I’ll have what you’re having. Girlfriend wearing a great new pair of shoes or awesome dress? I’ll go check out the store.

It’s not that I didn’t read the prices on the menu or peruse the price tags on those beautiful togs: I often had the salad or app instead of that pricier entrée. And I was just as happy to find a good secondhand store as I was a chic boutique. But what I note now is that I never questioned whether that was where I should be spending my money. This is how my colleagues behaved, so I thought I was acting my wage.

Of course, there were things we never discussed: Retirement, savings, investments, who was getting help from their parents, who was working a second job, who was going deeply into debt. But I’m only aware of those now.

My career kept climbing along with my friends’: I got bigger jobs with bigger paychecks, and hit better restaurants. Ten years later, I got a big job back home in Washington, DC. In one way, I was smart: Something told me that credit was a drug I wouldn’t be able to handle, so I kept my limits low. But I was making more than five times the salary I’d made at the beginning of my career—and saving none of it. Instead, I rented myself a gorgeous 2,000-square foot loft. I could have parties for work there, I thought. That’s what someone in my position would do.

When I met my husband and started planning a wedding, my compunction about credit card use went out the window. A few years later, for the first time ever, I had credit card debt—and my half of our combined load was about as much as my first year salary had been. After a few years of carrying that, the daily and monthly anxiety led me to my ah-ha! moment.

That was really the turning point. I needed to act my real wage, not what I vaguely thought someone with my salary and title ought to be spending. For the first time, I seriously started socking cash away for a rainy day. And I became much more deliberate and mindful. When a job took me back to New York and my husband and I were long-distance for a year, I took the bus — not the train, not a shuttle — to see him most weekends. The college kids that rode with me did look at me a little funny, but whatever. When I needed to shop for new work clothes, I targeted designers on eBay. Later, we bought a house for far less than we could afford, in a far grittier neighborhood than most of our friends, but we love it and it’s right for us.

The calculus works the other way, too: Our son’s first three years of school were at a private school where many families far out-earned us, but we thought it was a worthwhile splurge. And next year, after 10 years of driving our old clunker, my husband’s dream will come true: He’ll finally be able to afford that Tesla he’s been after.